Cannabis Tax Revenue Update

In November 2016, California voters approved Proposition 64, which legalized the nonmedical use of cannabis. The state levies two excise taxes on cannabis: a retail excise tax and a cultivation tax.

June Budget Assumptions. The June 2018 budget package assumed that 2017-18 revenue would be $185 million and that 2018-19 revenue would be $630 million.

Updated 2017-18 Estimate: $84 Million. The administration currently estimates that retail excise tax revenue was $77 million and cultivation tax revenue was $7 million in 2017-18, for a total of $84 million ($101 million below the projection in June).

First Quarter of 2018-19 Revenue $64 Million. For the first quarter of 2018-19 (July through September), retail excise tax revenue was $52 million and cultivation tax revenue was $12 million, for a total of $64 million. This was substantially more than was collected in any quarter of 2017-18.

2018-19 Revenue Scenarios. So far, cannabis tax revenue has grown at an average quarterly rate of 33 percent. How long this rapid growth will continue is unclear. If revenue continued to grow at this rate through the end of the fiscal year, the 2018-19 total would be roughly $410 million. In a more modest growth scenario—five percent per quarter—2018-19 revenue would be $280 million.